Daily Market Color

Steel and Aluminum Tariffs Remain in Focus


“Trade Wars are Good”

Global financial markets fluctuated throughout the day as investors struggled to ascertain the true intentions behind President Trump’s announcement of tariffs on steel and aluminum imports.  While several market participants feel that yesterday’s pledge was nothing more than a negotiation tactic by the man who authored “The Art of the Deal”, Trump seemingly doubled down on his comments today as he tweeted “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.”  Regardless, the plan received negative feedback from several governments around the world, with Canada and the EU threatening retaliation, France labeling it unacceptable and China requesting restraint.



US Treasurys sold off throughout the trading session, with yields/rates climbing 2-7bps across the curve in a bear-steepening pattern.  The 10-year note yield is poised to finish the week near 2.86%, 1bp lower than where it opened Monday, albeit there was no shortage of volatility in response to Jerome Powell’s hawkish Congressional testimony on Tuesday and President Trump’s tariff threats over the past two days.  Major stock indices were mixed on the day, with the DJIA slipping 0.3% while the S&P 500 (+0.5%) and Nasdaq (+1.1%) posted steady gains.  In commodities, crude oil futures finished the week on a high note as WTI crude gained 0.4% to $61.25/barrel.  The US dollar fell for a second straight session, losing 0.3% against major currencies.



Consumers Remain Optimistic

A limited day of key economic data releases was headlined by a report which displayed consumer confidence in the economy reaching its second-highest level in the past 14 years.  The University of Michigan’s consumer-sentiment index recorded a 99.7 reading, which was slightly lower than the preliminary level of 99.9, but significantly higher than January’s 95.7.  Both components of the index showed steady advances, with the measure of current conditions climbing 4.4 points to 114.9 and expectations for future economic performance up 3.7 points to 90.0.



Rolling Back Regulations

On the regulatory front, the Senate is gearing up for a vote next week to revise the Dodd-Frank Act which would ease some of the burdens imposed by the regulations. The bill proposes to change the threshold for the systemically important financial institutions (“SIFI”) designation from $50 billion to $250 billion, alleviating the mid-size banks and other financial entities from the stricter Federal Reserve supervision. Senate Banking Committee Chairman Mike Crapo is working on expanding the bill to include other revisions that were approved by the House of Representatives, sponsored by Jeb Hensarling.  While the bill is not likely to provide all of the modifications desired by the financial industry such as a repeal of the Consumer Financial Protection Bureau or full repeal of the Volcker Rule, any relief will be a welcome change.

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